Value added

Value Added

‘Value added’ represents the wealth created by the activities of a business. It is defined as: sales, less the cost of bought-in materials, components and services.1 It can be calculated from a business’ accounts – via  the additions of operating profit, employee costs, depreciation and amortisation.

The bank has reported on value added since 2002, and this is presented alongside that of CIS for 2003.

(Source: CIS and Co-operative Bank Financial Statements 2003)

The following two graphs benchmark CIS’ and the bank's labour productivity,  or value added per employee. At the bank, value added has increased from £63,600 per employee in 2002 to £64,500 in 2003. In contrast, value added per employee decreased 5.3% across the banking sector as a whole in 2003.

Value added per employee – life assurance providers, 2003 (£000s)

 Value added per employee – high street banks, 2003 (£000s)
 

(Source: CIS and bank figures: Sustainable Development Team 2003. All other figures: DTI (2004). The 2004 Value Added Scoreboard - Commentary and Analysis).

The following two graphs benchmark CIS’ and the bank's value adding efficiency (employee costs and depreciation as a percentage of total value added). Value adding efficiency indicates the value added for each £1 input of labour and depreciation costs.

Value added / costs – life assurance providers, 2003 (%)

Value added / costs – high street banks, 2003 (%)

(Source: CIS and bank figures: Sustainable Development Team 2003. All other figures: DTI (2004). The 2004 Value Added Scoreboard - Commentary and Analysis).

An alternative way of presenting value added is described by SPI Finance2. This methodology seeks to address value added from the perspective of wealth distribution (as opposed to wealth generation) and is derived from the addition of those elements of a business’ economic value which are shared amongst owners, staff and the state. As outlined in the pie charts below, of the £278.1 million value added created by The Co-operative Bank in 2003, £112.2 million was distributed to the bank’s owners, £39.1 million (14.1%) to the state and  £126.8 million (45.6%) to staff. Of the £471.9 million value added created by CIS in 2003, £146.1 million (31%) was distributed to CIS’ owners and £327.7 million (69%) to staff3.

Distribution of CIS’ value added

 *Note: £473.8 million was distributed to owners and staff, comprising £471.9 million value added and £1.9 million in tax recoverable.

Distribution of The Co-operative Bank’s value added

(Source: CFS Sustainable Development Team)

1 DTI (2004). The 2004 Value Added Scoreboard – Commentary and Analysis
2 www.spifinance.com
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3 In 2003, CIS recovered £1.9 million tax on profit / loss on ordinary activities